PM gets tough on deals for well-off

Mark Kenny

The Prime Minister, Julia Gillard, will commit her government to big ''structural'' cuts in spending, putting a range of concessions and tax breaks enjoyed by wealthier Australians in doubt.

In her first big agenda-setting speech for the year, Ms Gillard will use an address to the National Press Club on Wednesday to say the cuts are necessary for the government to fund its signature education and disability reforms, which are likely to be the centrepiece of its campaign.

The spending cuts, according to excerpts from her speech notes released to the media, were ''tough and necessary'' in a new ''low-revenue environment'', a reflection of flat company tax receipts after the mining investment boom peaked.

Her speech raises the possibility that years of accumulated concessions for upper middle-class and wealthy voters, handed out by successive governments and continued under Labor, may now be either trimmed or axed.

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This could include changes to family payments, cuts in concessional tax arrangements for self-funded superannuation contributions, a further tightening of the private health insurance rebate, a decrease in the 50 per cent capital gains tax discount, and a clampdown on loopholes such as the exemption from fringe benefits tax for employees of churches and charities.

The potentially risky strategy is consistent with Ms Gillard's conviction that Labor's best hopes for victory lie in reconnecting with its traditional heartland, even if that means alienating some comparatively well-off families. With the government still reeling from its backdown on delivering a budget surplus, Ms Gillard's language reveals a preference to get the bad news out early.

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That would clear the way for it to focus on its national disability insurance scheme and the Gonski education reforms, both premised on a budget that is coming back into balance.

''In the lead-up to, and in the budget, we will announce substantial new structural savings that will maintain the sustainability of the budget and make room for key Labor priorities,'' she will say.

While no specific payments or programs have been publicly earmarked, the Prime Minister wants voters to understand the government's logic for making painful efficiencies.

''Our record of cutting wasteful programs, in line with our Labor values and purpose, is already strong,'' she will say, listing previous cuts despite their unpopularity with voters.

''The dependent spouse tax offset, the tax breaks for golden handshakes, tax concessions on super for high-income earners, the millionaires' dental scheme and fringe benefits loopholes for executives living away from home … all gone,'' she will say.

''We will make the tough, necessary decisions to ensure our medium-term fiscal strategy is delivered, and our centrepiece plans for Australian children and Australians with disability are funded,'' Ms Gillard will say.

Visiting a cancer centre in Melbourne, Opposition Leader Tony Abbott called on Ms Gillard to "say precisely" what the budget position is in her Press Club address.

"If she is fair dinkum, she is going to have to come clean with the Australia people about the state of the federal budget," he said on Wednesday.

"She must tell us what the budget deficit is going to be this year . . . if she doesn't, it's all just so much spin and hot air."

And shadow treasurer Joe Hockey said that when Labor talked about savings, it was code for tax increases.

''The bottom line is under Labor, Australians are going to have to pay more because they waste money,'' Mr Hockey told ABC radio.

Asked if Ms Gillard's speech was addressing the ''culture of entitlement'' Mr Hockey had railed against in a speech last year, he replied he had been talking about Europe.

''If the Prime Minister wants to go down the path of increasing taxes on business and consumers, that's going to undermine confidence in the Australian economy,'' he said.

Liberal frontbencher Christopher Pyne said Ms Gillard needed to use her address to ''outline a sustainable economic plan for the country''.